May 4, 2015

Labor Unrest in South America Shifts from Brazil to Argentina

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The last couple of big labor issues in South America were the strikes by the Brazilian truck drivers, but now the focus of labor unrest has shifted from Brazil to Argentina. Late last week a number of unions staged work stoppages at the main port complex near Rosario. It started off with the boat captains who dock the vessels striking for 24-hours over higher wages. Next came the dock workers and the workers at the soybean crushing plant conducting their own 24-hour strike.

All of these actions were warnings from the various unions that their wage demands need to be taken seriously. One of the main problems in all these negotiations is what the participants consider is the actual rate of inflation in Argentina. The government estimates the inflation rate at 1.5% per month or 18% per year while most economists think it is 30% or more.

There may be more strikes this week as well, but these sort of work stoppages are very common in Argentina at this time of the year. Generally, these strikes do not last very long and the issues get resolved in a matter of days and not weeks. Therefore, there may be some temporary disruptions to port activities, but I do not expect any long term disruptions due to these labor issues.

In Brazil, the second truck driver strike ended in a whimper earlier last week after having very little impact. The Brazilian truck drivers are now resigned to the fact that the government is not going to issue mandatory minimum freight rates. Instead, they will have to rely on the government's recommended freight rates instead of freight rates that are written into law.

Even without the mandatory freight rates, the truckers did achieve a number of advances including: modifications to the truck driver law that allows them more flexibility in the number of hours they may be behind the wheel, reduced tolls for empty trucks, and a one-year deferral on payments for truck loans from the National Development Bank (BNDES).

Additionally, last week the Brazilian Congress approved a R$ 30 billion line of credit at BNDES to be used by truckers to refinance their truck loans at lower interest rates. The legislation is now on President Rousseff's desk awaiting her approval or veto. There will probably be future labor issues in Brazil including at the ports, but the truck driver issue is now "in the rear view mirror" so to speak.